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What' s Back of Marketim 



BY DR. H. G. TAYLOR 




LESSON A 



The American Institute of Agriifultuje 



WHAT'S BACK OF MARKETING 

By DR. H. C. TAYLOR 

Chief, Bureau of Agricultural Economics 

U. S. Department of Agriculture 



LESSON A 




"Every Lesson By A National Authority" 



Confidential Edition 
Issued for Members 

^ ^ ^ 

Copyright, 1922 

THE AMERICAN INSTITUTE OF AGRICULTURE 

CHICAGO 



The Man Who Conducts This Lesson 




.T32 



Dr. H. C. Taylor 

"No government expert can tell me anything about 
farming that I don't know." 

"I didn't come here to tell you anything about 
farming, my friend, I came to look at your herd of 
dairy cows. I need a little new blood in my herd, 
and I thought you might have a young bull that would 
be just what I wanted." 

The farmer's attitude changed immediately, and 
within five minutes, he was just as chummy with Dr. 
Henry C. Taylor, Chief of the Bureau of Agricultural 
Economics of the United States Department of Agri- 
culture, as he v;as with his next door neighbor. 

That is typical of hundreds of experiences Dr. 
Taylor has had. It is also typical of the way he 
has gained the confidence of thousands of farmers. 
It has always been his belief that to help farmers 
most, a scientist should be a farmer himself. And 
so both for this purpose and for his own pleasure and 
profit, he has operated a general farm, v/ith an 
accredited herd of dairy cattle. 

It is Dr. Taylor's doctrine that theorizing is 
of value only as a basis for practical investigation. 



'Cl AGO 61 22 



M -2 73 



WHAT'S BACK OF MARKETING? 



and farmers should be supplied, not with theories, 
but with facts that have been worked out in actual 
practice. 

This is characteristic of all his work which, 
since he graduated from the Iowa Agricultural Col- 
lege in 1896, has been directed exclusively to the 
development of the study and application of agri- 
cultural economics. 

He believes in getting information first-hand, 
and so he has visited thousands of farms, both in 
this country and in Europe. After studying economics 
under Dr. Richard T. Ely in the University of Wis- 
consin, he went to London for study in the London 
School of Economics ; and then to Germany to study 
further in the Halle Wittenberg University and the 
University of Berlin. 

He says that his most important accessory, while 
engaged in study • iroad, was a bicycle, on which he 
pedaled many hundred miles through the British 
Isles and Continental Europe. A bicycle was to his 
liking because it was adapted to the frequent stops 
he made to study farms and fields along the way. 

He was given the degree of "Doctor of Philosophy" 
by the University of Wisconsin upon his return from 
Europe in 1902. This title was conferred in recog- 
nition of a study he had prepared upon the subject 
of "Land Tenure in England." 

Perhaps one reason v;hy Dr. Taylor was early 
"fired v/ith the ambition" to develop a real, practi- 
cal study of agricultural economics was due to the 
fact that no such work had previously been done. 
Even the subdivisions of economics, farm manage- 
ment and marketing, had been woefully neglected. 
This is why his only source of education in prepara- 
tion for this agricultural work was represented by 
the general university courses in economics. The 
economic principles which he secured from these 
studies, he has applied to the practical operation 
of farms. 

Because of the unique preparation he had given 
himself while in Europe, the University of Wiscon- 
sin inaugurated a course of study in agricultural 
economics to be conducted by Dr. Taylor, and in 1905 
he wrote the first text book on "Agricultural Eco- 



LESSON A 



nomics," which has since been steadily used as the 
leading text on the subject. 

In 1908 his work was further recognized by the 
establishment of a Department of Agricultural 
Economics, of which he had full charge until 1919, 
when, with an ambition to be of greater use to the 
farmers of America, he accepted the position of 
Chief of the Office of Farm Management of the United 
States Department of Agriculture. 

In 1921, the Bureaus of Markets, Crop Estimates, 
and the Office of Farm Management were combined, and 
Dr. Taylor was made Chief of this combination, which 
is now known as The Bureau of Agricultural Economics. 

Thoroughness and practicalness characterize 
all of the work directed by Dr. Taylor. As you feel 
the influence of his sincerity and ability in your 
study of the first lesson in this course, you will 
understand and appreciate the value of these char- 
acteristics. 

SUMMARY OF DR. TAYLOR'S TRAINING AND EXPERIENCE 

EXPERIENCE: Chief, Bureau of Agricultural Economics, D. S. Department of 
Agriculture, July, 1922- 

Chief, Bureau of Markets and Crop Estimates, D. S. Department of Agri- 
culture, 1921-22 

Chief, Office of Farm Management, 0. S. Department of Agriculture, 
1919-21 

Chairman, Department of Agricultural Economics, University of Wisconsin, 
1908-19 

Instructor of Commerce, University of Wisconsin, 1901-08 

A practical farmer and farm owner 

MEMBER: American Economic Association, American Farm Economic Associa- 
tion, Association American Geographers 

AUTHOR: "Introduction to the Study of Agricultural Economics," 1905; 
''Agricultural Economics,"' 1919; also numerous bulletins 

EDUCATION: Drake University, Des Moines, Iowa, 1891-93; B. Agri . , Iowa 
State College, Ames, Iowa, 1896; M. S. A., Iowa State College, 
Ames, Iowa, 1898; Ph. D. , University of Wisconsin, 1902 
Studied in: London School of Economics, one term, 1899; Halle- 
Wittenberg University, 1900; University of Berlin, 1900-01 



HOW TO STUDY LESSON A 

Suggestions for study such as this are provided 
with each lesson. But this one is much longer than 
the others. Don't be discouraged by its length. 
After you become accustomed to studying these les- 
sons, you will not need nearly so many suggestions. 

Why You Should Know World Conditions 

As you will see, there are two parts to this 
lesson. In the first part, you will learn about the 
standing of the various countries of the world 
in production, exports, and imports. In other words, 
you will learn where the surplus food and clothing 
materials are produced, and where they are needed. 

In Part II, you will learn of the services per- 
formed on these products between the time they leave 
the farm and the time they arrive at the home of the 
consumer. Marketing services, these operations 
may be called. 

Why should you know where the various crops are 
grown? And why should you know the relative stand- 
ing of the world's crops? 

First, you must realize that this world is growing 
smaller every day. The present means of rapid 
transportation and communication make it easy for 
us to deal with people in every civilized land. But 
more important than that, we are having more to do 
with each other as nations. Almost every civilized 
country buys something from America, and in turn, 
we buy from many other nations. 

The commerce of the world is the basis of civili- 
zation and progress, and agricultural products 
make up a large part of the world's commerce. And 
so, you must know about world agricultural commerce 
to understand marketing in America. 

First, Master Fart I 

By all means master Part I first. Don't be in a 
hurry to finish with it. Go over it many times, and, 
if possible, assume a different viewpoint each time 
you study it. 

For example, read it at first with the idea of a 
student - simply to learn the situation as it is. 

5 



LESSON A 



The second time, study the lesson v;ith the idea 
that you are a farmer who has products to sell and 
who is interested in knowing v;hat becomes of those 
products after they are purchased by the local buyer. 

The third time, imagine yourself the owner of 
a big flour mill, and study the lesson with the idea 
of fixing in your mind the competition you, as a 
miller, would have in buying wheat. You will learn 
that not only millers in other parts of this country, 
but millers in other nations of the world are all 
eager to get a part of the v/heat grown on our great 
western plains. 

Then, try studying the lesson with still another 
viewpoint. Imagine yourself a mill owner in France. 
You will study the lesson with a somewhat similar 
viewpoint to that of the miller in the United States. 
You, the same as he, will be eager to learn just what 
competition there is in the buying of v/heat, for it 
is competition in buying when the crop is short that 
makes the price go up. 

You will also be eager to learn just what other 
sources of supply may be drawn upon besides the 
supply in the United States. 

You will be interested to know that India is 
a big producer of wheat. But you may be a little 
disappointed to learn that India does not export 
a great deal. 

Second, Talk With Others 

There are many other surprises in store for you 
as you study Part I. But all of them are pleasant 
surprises. You will be delighted with your newly 
acquired knowledge, and you will surely get a good 
deal of pleasure, as well as derive much good from 
talking over these facts with your friends. 

You will find it of big advantage to yourself to 
talk over what you have learned in each lesson with 
someone. Just see how m.any people in your community 
actually know what the greatest crop in the world is. 
Most of them will probably say "wheat." But you 
will learn from Part I that wheat is not the biggest 
crop. 

Before you leave Part I, make sure that you know 
which countries are likely to be customers of ours 
and which countries are likely to be competitors. 



WHAT'S BACK OF MARKETING? 



You will learn, for example, that Great Britain is 
one of our biggest customers for wheat, and that 
Russia (in normal times) is our greatest competitor 
in selling to Great Britain. Right now, Argentina 
is our greatest competitor. 

You will learn many more facts about this world 
competition, and you should be sure that you have 
this situation clearly in mind before you proceed 
with Part II. 

Remember that conditions change from year to 
year. There may be a big crop of wheat and corn in 
the Argentine this year, but next year the drought 
may destroy a large part of both crops. And then the 
competition with the United States will be less. 

The standing of the nations in the rank of crops 
may be different five years from now than the rank 
indicated in this lesson. 

This will emphasize to you the importance of 
keeping informed as to crop conditions and produc- 
tion in at least some of the foreign nations. 

Later in the course, you will learn all of the 
details about how to keep informed on these subjects, 
and you will also learn how to interpret the informa- 
tion secured. 

Remember that this is the basic lesson, and this 
lesson is the foundation on which your course will 
be built. Unless your foundation is well made, you 
will have much difficulty in understanding many of 
the things you will learn in future lessons. 

Part I will inspire you to know more about ocean 
shipping, rail shipping, the financing of marketing, 
and a thousand and one other subjects. It is impos- 
sible to treat them all in this one lesson, but you 
will be given all of the details as you proceed with 
the course. These details will come to you in an 
order that will make them easy for you to master. 

Third, Learn the Ten Marketing Services 

After you have mastered Part I, proceed with Part 
II. The im.portant thing for you to learn from Part II 
is represented by the 10 services there listed. 

These marketing services are each important, 
and the best way to memorize them is to study with 
extreme care the explanation of each one. 



8 



LESSON A 



There isn't any particular value, perhaps, in 
learning this list of 10 services in order, because 
it isn't always that a product is handled in the 
same order. As a matter of fact, some products are 
marketed without having more than one or two of these 
services performed before it reaches the ultimate 
consumer. You should be sure that you understand 
why each one of these services is performed. 

In Lesson B, you will be told who performs these 
various services, but don't let that worry you in 
this lesson. First, be sure you understand what 
the services are, and why they are performed. 

Fourth, Let Your Neighbors Help You Learn 

By all means, talk over the various services 
with different people in your community. Good 
people with whom to talk of these subjects are the 
following: 

1. Farmers 

2. Local buyers of farm products 

3. Millers and manufacturers 

4. Managers of farmers' cooperative 
organizations 

5. The local farm adviser 

6. School teachers 

7. The superintendent of schools 

8. Bankers 

The facts are here. This lesson is just brist- 
ling with interesting and valuable information on 
marketing, and so are all of the other lessons that 
will follow. 

Don't be confused by the large amount of new 
information you will find here, but proceed with 
your study in an orderly manner, following the sug- 
gestions here laid down, and you will find that you 
will be able to master this lesson satisfactorily. 

Fifth, Use the Study Outline for Review 

Use as the basis for study, the study outline. 
You will want to refer to this frequently, especially 
as you review the subject before answering questions. 
You will also want to use it for reference. It 
serves as an index to the lesson. 

S ixth, Answer Questions After Lesson Is Mastered 

Do not attempt to answer the questions until you 
have followed all of the suggestions made here and 
feel that you have really mastered the lesson. 



STUDY OUTLINE FOR LESSON A 

What^s Back of Marketing 

Page 

When Scientific Market Study Began 13 

We Need the Facts About Marketing 14 

Why There Are Surplus Areas and Deficit Areas 14 

It Pays to Specialize 15 

The Right Way to Look at Marketing 15 

Production Areas Are Small 16 

How the Necessity for Markets Arose • 16 

Industrial Developments Encouraged Specializa- 
tion 18 

PART I 

Where the World's Crops Are Grown 18 

Analysis of World Markets is Simple 19 

The Ten Important Crops 19 

Importance of World Crops, Based on Produc- 
tion 20 

Importance of World Crops, Based on Exports.. 20 

Rank of Crops in the United States 20 

What Nations Produce and Export Most 21 

The United States Leads in Agriculture 21 

India is the World's Second Agricultural Nation 23 
Russia is the World's Third Greatest Agricul- 
tural Nation 24 

Argentina is the World's Fourth Great Agricul- 
tural Nation 25 

Germany is the Fifth Great Producer 25 

Netherlands Ranks Sixth 25 

How Other Nations Rank in Production and Export 26 

What Nations Buy Most of the Surplus Crops 31 

The United Kingdom, the Greatest Buyer 31 

Germany, the Second Largest Buyer 31 

Holland Stands Third as an Importer 31 

France is the Fourth Importer 32 

Belgium is Fifth 32 

How the Rank of Nations is Important to 

American Farmers 32 

9 



10 LESSON A 

STUDY OUTLINE— (Continued) 

PART II 

What Happens to Crops on the Way to Market 33 

1. Standardization Usually Comes First 34 

Where Grading is Done 34 

No Other Service Increases the Price Like 

Standardization 35 

2. Packing - How Proper Packing Facilitates 

Market ing 35 

Effective Packing Reduces Marketing Costs. 36 
Products in Packages Are Best for Col- 
lateral 36 

Consumers Will Pay More for Neat Packages. 37 

3. Assembling - in Larger Lots Meets Market 

Demands 37 

4. Storage - We'd Starve in Winter If It Were 

Not for Storage 38 

How Storage Serves Both Producers and 

Consumers 38 

5. Transportation - Why Transportation Adds 

So Much to the Cost of Marketing 39 

Local Hauling is Expensive 39 

6. Financing - How Marketing is Financed 40 

Commission Houses Advance Money to Local 

Buyers 40 

Buyers May Get Immediate Cash From Ship- 
ment s 40 

Why Interest Charges Multiply 41 

Interest Piles Up When Wheat is in Storage. 41 

7. Risk-Taking- How It is Handled 41 

"Carrying the Risk" is a Necessary Evil... 42 

8. Processing and Manufacturing - Have Become 

Important Parts of Marketing 42 

Manufacturing Improves the Product 43 

9. Selling, A Much Repeated Process 43 

Why Expert Knowledge is Needed in Selling. . 44 

10. Dispersing, the Opposite of Assembling 44 

Both Wholesalers and Jobbers Are Needed. . . 45 

Each Service Has Subdivisions 45 

How Education Will I mprove Marketing Conditions 46 



INTRODUCTION TO LESSON A 

You have learned by a study of the Introductory 
Marketing Talk, why we have a marketing problem. 
But you have enrolled in this course with the idea 
of learning exactly how to market. And this lesson 
will give you the foundation material for that study. 

Do not be confused or disappointed upon finding 
that this lesson treats of all agricultural products. 
It is essential that you know the fundam.ental prin- 
ciples upon which our marketing system is based, 
and you can understand this best only when it is 
explained to you in terms of marketing all farm 
products. 

Keep this in mind as you proceed. You will 
appreciate the importance of it before you have 
gone far in the course. 

The United States Leads the World in Agriculture 

You will learn here that the United States is the 
greatest agricultural country in the world. Not 
only do we produce more farm products than any other 
nation, but the value of our agricultural exports 
exceeds the value of those from all other nations in 
the world combined. That is a remarkable record. 
It means that the United States supplies most of the 
world's surplus food and clothing materials. 

In spite of this fact, the exports of the United 
States at present are only one-eighth of the produc- 
tion. In other words, we use about seven-eighths 
ourselves, and export the rest. That will emphasise 
to you the enormity of our production. 

American Farming Metho ds H ighly Ef f icient 

It is important to know in connection with this, 
that our big production is due more to the efficiency 
of our farmers than to their number. Six and one- 
half million farmers in the United States, assisted 
by a smaller number of farm laborers, represent 
probably less than 4% of the farmers and farm laborers 
of the world. 

11 



12 LESSON A 

Nevertheless, this 4% produces about: 
70% of the world's corn crop 
60% of the world's cotton 
50% of the world's tobacco 
25% of the world's oats and hay 
20% of the world's wheat and flax 
13% of the world's barley 

7% of the world's potatoes 

5% of the world's sugar 

We also produce some rye and rice, but only 2% 
of the world's total. 

Taking cereals by themselves, the United States 
produces about one-fourth of all the world's cereal 
crops. But even more important than this is the 
fact that in the United States the production of 
cereals amounts to about 12 tons for each person 
engaged in agriculture here, while in the rest of the 
world the production of cereals averages only 1.4 
tons for each person engaged in agriculture. That 
is emphatic testimony of the effectiveness of our 
modern production methods. 



WHAT'S BACK OF MARKETING? 
By Dr. H. C. Taylor 

The great economic question, "How shall American 
farm products be handled?" is now arousing more 
interest than ever before, 

"And this is because there has been an almost 
complete breakdown in the machinery of distribution 
during the last few years, so that most of our 
agricultural crops have not been marketed under con- 
ditions which would permanently maintain the pros- 
perity of American agriculture," says one of our 
agricultural leaders. 

Heretofore, all too many persons have looked 
upon the marketing machinery as a kind of mystery; 
as something that operates in the dark, understood 
by few, with only a few capable of participation. 
This view has been shared, perhaps unconsciously, by 
both farmers and consumers. Farmers have devoted 
their energies largely to production and yet more 
production, and have taken what they could get for 
their products. And consumers have been mainly in- 
terested in buying as cheaply as possible. 

When Scientific Market Study Began 

Scientific study of marketing may be said to have 
had its beginning in 1900, when the U. S. Industrial 
Commission was charged by Congress with the duty of 
investigating "questions pertaining to immigration, 
to labor, to agriculture, to manufacturing, and to 
business. " 

This commission deemed the question of marketing 
to be of such fundamental importance that it sub- 
mitted an advance report on the distribution of farm 
products in order to "furnish Congress and the public 
with concrete data, assembled from a hitherto but 
partially exploited field of investigation" with 

13 



14 LESSON A 



the suggestion that it might "form a basis for intel- 
ligent analysis, useful alike to the legislator, the 
farmer, and the business man." 

But even with this impetus to study, scientific 
investigations of marketing problems v/ere slow to 
develop even among agricultural research workers. 
Today, on the contrary, everyone is interested in 
the marketing process and everyone seem.s bent on dis- 
cussing it. Farmers and consumers, alike, feel that 
it is a matter that concerns them vitally. 

We Need the Facts About Marketing 

The great need now is that such discussion shall 
be based on a clear idea as to what constitutes mar- 
keting. What is it that takes place between the time 
a product leaves the farm and the time it is purchased 
by the ultimate consumer? What are the intervening 
phases and what are their objects? Who participates 
in them? Are they necessary to the satisfactory 
feeding and clothing of the world? 

In town and country, among thinking men and 
women, those questions are uppermost today. An 
encouraging number of people are no longer willing 
to follow the demagogue or to take the passive part, 
but are earnestly anxious to understand this matter 
thoroughly. 

Through the developments of modern life, agri- 
culture has become commercial. No longer do the 
farmers of America produce their crops primarily for 
the satisfaction of their own wants, but they produce 
them for the markets just as other business men manu- 
facture their products to fill the demands of their 
customers. 

WHY THERE ARE SURPLUS AREAS AND DEFI CI T AREA S 

In thus producing for market, farmers individu- 
ally, and in groups, and by large regions, have found 
that they can get best results by specializing on 
certain crops or lines of farming for which they have 



WHAT'S BACK OF MARKETING? 15 

special aptitude, or, more generally, to which their 
region, their climate, and their conditions of farm- 
ing are especially suited. For example, the Dakotas 
produce wheat; lov/a produces corn and live stock; 
Wisconsin specializes on dairy products and potatoes ; 
and Texas sells cotton and cattle. Each state pro- 
duces a large surplus of a few articles and must buy 
many articles from other states and from other 
countries. 

Similarly, large countries become surplus-pro- 
ducing regions of certain necessities while other 
countries, deficient in these products, have sur- 
pluses of other commodities which they wish to ex- 
change for what they do not have. 

It usually happens that these large surplus and 
deficit regions are widely separated. Frequently, 
a nation is dependent for one of the staples of life 
on a region half way around the world. Thus, terri- 
torial division of labor has become intensified as 
national life has become crystallized along well- 
defined lines. 

It Pays to Specialize 

Nations have learned that it pays to work with 
nature rather than against her, and that, as a general 
rule, each nation fares best when devoting its ef- 
forts to the things it can do best. Trade customs, 
trade routes, and the development of huge markets 
far from the heart of the producing countries have 
developed to facilitate the exchange of surplus 
crops. 

The Right Way to Look at Marketi ng 

If you think of marketing in terms of selling 
products in your own state only, you cannot compre- 
hend the necessity nor the importance of many of the 
conditions existing in our present marketing process. 
So, in this lesson, you will be given a clear picture 
of the world with its productive and its non-pro- 



16 LESSON A 

ductive areas, of the areas that produce a surplus, 
and the areas that must buy food and clothing ma- 
terials. 

P roduction Areas Are Small 

Examine carefully the map which is provided with 
this lesson as Figure 1. On this map you see all the 
countries of the world, and you find shaded areas to 
indicate those few sections where there is the proper 
rainfall to produce crops profitably. Isn't it 
surprising that there are only seven important crop 
producing areas? 

This map will certainly impress you with the fact 
that much the larger percentage of the area of the 
world is comparatively unproductive. 

How the Necessity for Markets Arose 

Naturally, the first development in marketing 
was the creation of local trading centers where the 
surplus production from one farm might be exchanged 
for the surplus production from some other farm. 

For example, one farmer grew more corn than he 
needed, but kept no sheep. Another farmer, not so 
far away, raised sheep but did not grow enough corn. 
So the one farmer exchanged his surplus corn for wool 
to make clothes for his family, and the other ex- 
changed his surplus wool for corn to feed his live 
stock. 

Finally, there was more surplus wool on hand 
than could be used by the community surrounding this 
local market, and there was also more surplus corn 
than was needed. In other sections, some local 
markets were short of corn and some were short of wool, 
and so, men from those markets visited other local 
markets in an effort to buy what was needed. Thus, 
there grew the interchange of products between local 
markets. 

As population increased in the Old World, it be- 
came increasingly difficult to produce enough food 



WHAT'S BACK OF MARKETING? 



17 




FIGURE 1 
LARGEST PART OF THE WORLD IS DEFICIENT IN RAINFALL 
Only the seven comparatively small areas numbered on this map have 
sufficient rainfall to produce surplus crops. Fix their location in your 
mind by studying' this map frequently. The black areas have too much 
rainfall for our staple crops. The white areas do not have enough rain- 
fall. 



18 LESSON A 

and clothing materials on the land of some countries 
to provide for the population, and so the Old World 
sought food and clothing materials in the New. 

Industrial Developments Encouraged Specialization 
Ocean transportation developed until it became 
a simple and comparatively inexpensive process to 
transfer the surplus from the Western Hemisphere to 
the Eastern Hemisphere, where it was very badly 
needed. The invention of the cotton gin in America 
and the development of spinning and weaving machinery 
in England, worked together to pave the way for a 
more economical means of providing clothing for the 
nations of the world. 

With these developments, America grew to be the 
world's greatest producer of raw cotton and England 
and Continental Europe have manufactured more of the 
clothing for the world than any other section. 

Other nations specialize in other things: Aus- 
tralia now leads in sheep, Brazil in coffee, India in 
rice, and Germany in potatoes. The surplus from 
these nations is easily stored and quickly trans- 
ported, and it is now easy to provide both food and 
clothing for all peoples, 

PART I 
WHERE THE WORLD'S CROPS ARE GROWN 

As you will see from the Map (Figure 1) there are 
seven general regions in the world, four in the Old 
World, and three in the New, in v/hich the rainfall is 
sufficient to permit the development of agriculture 
on an important scale. 

Within these areas, there are regions in which 
the rainfall is too heavy. The Amazon Valley of 
northern South America, some parts of the western 
coast of Africa, in the East India Islands, and in 
some parts of southern Asia, the rainfall is over 80 
inches a year. 

Agriculture is best developed in regions of 
moderate rainfall, such as: 



WHAT'S BACK OF MARKETING? 19 

1. Central and eastern United States, the 
world's greatest agricultural area. 

2. Southeastern Asia, the rice producing area 

3. Densely populated Europe, productive, but 

the greatest buying area 

4. Southern and eastern South America 

5. Eastern and southern Australia 

6. Southern Africa 

7. The western coast of North America 

It is important to note that the best developed 
agricultural regions of the world are largely in the 
temperate zones. 

A jialysis of World Markets is Simple 

Undoubtedly, as you proceed, you will be sur- 
prised to learn how simple it is after all, to analyze 
v/orld markets. There are six large surplus pro- 
ducing centers and only one huge buying center. Of 
course, practically all nations produce a surplus of 
something, and buy other things from other nations. 
However, the most important thing to learn about the 
world's trade in agricultural products is that Europe 
(outside of Russia and the Balkan countries) is the 
one big buying area and the United States, India, 
Argentina, Australia, Canada, and Russia are the six 
big surplus producing areas. 

The Ten Important Crop s 

World statistics of crop production are not com- 
plete. China is a very important producer of many 
crops, but there are no satisfactory statistics of 
production in China. In discussing the relative 
importance of crops, therefore, it must not be for- 
gotten that the production of the larger part of Asia 
(China) is not included in the totals. 

The economic importance of a crop is measured in 
value. Probably the best standard of value, for 
those studying this course is American money. 



20 



LESSON A 



I mportance of World Crops. Based on Production 

Applying the average price received by farmers 
in the United States for their crops 1912-21, to the 
total volume of production for all countries re- 
ported, the order of importance of the 10 principal 
crops is as follows: 



1. 


Potatoes 


6. 


Oats 


2. 


Wheat 




7. 


Rye 


3. 


Corn 




8. 


Cotton 


4. 


Rice 




9. 


Barley 


5. 


Sugar 




10. 


Tobacco 


Importance of 


World 


Crops, 


Based on Exports 



Applying the average farm prices of these 
products in the United States to the quantities 
exported from all nations, the relative importance 
is as follows: 



1. 


Cotton 






6. 


Barley 


2. 


Sugar 






7. 


Tobacco 


3. 


Wheat 






8. 


Rye 


4. 


Rice 






9. 


Oats 


5. 


Corn 






10. 


Potatoes 


Rank of 


Crops in 


the 


Un: 


Lted 


States 



Corn heads the list in value of production; wheat 
is second. The order of importance of 10 crops 
follows: 



1. 


Corn 


6. 


Tobacco 


2. 


Wheat 


7. 


Sugar 


3. 


Cotton 


8. 


Barley 


4. 


Oats 


9. 


Rye 


5. 


Potatoes 


10. 


Rice 



This list does not include hay and forage because 
they enter but little into the marketing of farm 
crops. 



WHAT^S BACK OF MARKETING? 21 

In exports, wheat stands second in value. Cotton 

is first in value. The rank follows: 

1. Cotton 6. Oats 

2. Wheat 7. Sugar 

3. Tobacco 8. Potatoes 

4. Corn 9. Rye 

5. Barley 10. Rice 

WHAT NATIONS PRODUCE AND EXPOR T MOST 
Notice (in Figure 1) that the world's greatest 
producing countries are a long distance from the 
greatest buying center. The United States comes 
first in production and export, and the products that 
she sells to Europe have to be carried across the 
Atlantic. 

India comes second, and it is a long trip through 
the Suez Canal to Western Europe. Russia, alone, is 
near, but she has little surplus now (1922), The 
Argentine is fourth, and it is quite plain that the 
voyage to Western Europe adds a great deal to the 
price by the time goods arrive at the place v/here 
they are most needed. 

In short, the world's greatest supply areas are 
about half way around the world from the world's 
greatest deficit areas. 

It may be surprising to you to examine the accom- 
panying Table I, showing the rank in production and 
export of the six greatest agricultural countries. 

The United States Leads in Agriculture 

You can see from Table I that the United States 
is the greatest agricultural country in the world. 
As a matter of fact, it produces more of the world's 
exports of agricultural products than all other 
nations put together. 

Notice its high standing in grain, for example. 
It produces more of the three most important grains, 
wheat, corn, and oats than any other nation, and it 
produces the second most barley. It exports the 
second largest amount of wheat and corn. 



22 



LESSON A 



As a matter of fact, the United States exports 
more wheat now than any other nation. But, when 
Russia is producing normally, she exports more wheat 
than we do, and Table I is based on 1909-13 figures. 



Table I. 



United States 



THE WORLD'S GREA TEST _ A GRI CUL TURAL COUNTRIES 
(Based on Value of Crops Produced and Exported) 
1909 - 13 Averages 

First in Second in Second in 
Export of production of Export of 
Cotton kBarley Wheat 
Tobacco Cattle Corn 
Meat & Sheep 
Meat Pro- 
ducts 
Cattle 



India 



Russia 



4. Argentina 



■5. Germany 



o. "Netherlands 



First in 

Production of 

Wheat 

Corn 

Oats 

Cotton 

Tobacco 

Horses & 

Mules 

Swine 

Rice 

Sugar 

Cattle 

Goats 

Barley 

Rye 



Flax 



Potatoes 



Rice 



Wheat 

Oats 

Barley 



Flax 
Corn 
Hides & 
Skins 



Rye 



Potatoes 



Cotton 

Flax 

Tobacco 

Wheat 
Oats 

Potatoes 
Horses & 

Mules 



Sugar 
Swine 
Rye 



Flax 

Cotton 

Hides 8: 

Skins 

Rye 

Butter 



Oats 
Meat & 
Meat Pro- 
ducts 
Wool 
Potatoes 



Barley 
Cheese 



NOTE: It is extremely important that you thoroughly familiarize 
yourself with the standing of these six nations, and the reasons for the 
standing. More details are to be found in Table II and Table III. 

Although we produce over 70% of the world's corn, 
we do not export as much as Argentina and so we have 
to take second place in the exports of corn. 

We lead the world both in production and export 
of cotton. Our production is 60% of the entire 
v/orld's crop. 

We lead both in production and export of tobacco. 
As a matter of fact, we produce more than 50% of 
the world's total of tobacco. 



WHAT'S BACK OF MARKETING? 



23 



In addition to the crops already mentioned, we 
produce 50% of the world's oats and hay, 20% of the 
world's flax, 13% of the world's barley, 7% of the 
world's potatoes, 5% of the world's sugar, 27% of the 
world's rye, and 2% of the world's rice. 

Table II. RANK OF LEADING COUNTRIES IM PRODUCTION AND EXPORT OF LEADING 

FARM CROPS. "" 
(Based on 1909-13 averages) 



; : Crops arranged in order of World Rank 










: Rank : 1 
Countries : in :Pota- 
: :toes 


: 2 

: Wheat 


r 3 

rCorn 


: 4 

:Rice 


: 5 

: Sugar 


: 6 
rOats 


: 7 

:Rye 


r 8 

rCot- 
rton 


r 9 

:Bar- 
rley 


: 10. 

: To- 
rbacco 


; : 

: 11 : 

rFlax : 


1. United :Produo-: 
States :tion : 5 


1 


1 


1 


: 7 


: 
r 1 


: 6 


: 
r 1 


: 2 


: 1 


: : 

r 4 : 


:Exports: 8 : 


2 : 


2 : 






: 6 


: 7 


: 1 


■ 6 




• 10 : 


2. Russia :Produc-: 

:tion : 2 : 


2 . 






4 


2 


1 


4 


1 




3 : 


.•Exports : 


1 






5 


1 


2 




1 




5 : 


3. India iProduc-: 
:tion : 


3 . 


7 ; 


1 


1 






2 




2 


• 2 : 


rExports: 


7 




1 








2 


• 4 


• 5 


2 : 


4. Argen- rProduc-: : 
.tina :tion t : 


8 : 


3 : 






r 9 










r 1 : 


:Exports: : 


3 : 


1 : 






2 


8 








1 : 


5. Germany :Produc-: 

:tion : 1 


9 






2 


3 


2 




3 


6 




: Exports: 2 


10 




7 


3 


4 


1 


6 






9 : 


6. Nether- rProduc-: : 
lands :tion : 7 : 












10 










:Exports: 1 : 


5 : 


5 : 


5 


7 


3 


3 


8 


2 




5 : 


7. Austria :Produc-: 
Hungary :tion : 3 


5 


2 




5 


G 


3 




4 


3 


6 : 


rExports: 9 




8 




4 








3 


8 




8. France :Produc-: 

:tion : 4 


4 






8 


5 : 


5 




»9 


10 


8 r 


:Exports: 4 : 








7 






4 








9. RoumaniarProduc-: 

:tion : : 




5 : 
















9 : 


rExports: 


6 . 


3 : 






7 : 


4 : 




5 r 






10. Canada rProduc-r 

rtion r 10 


6 








4 : 






8 : 




5 : 


rExports r 10 


4 








5 : 






7 r 




3 : 



We lead in live stock by a wide margin. You will 
see from Table III that we have more horses and mules 
and more swine than any other nation. We are sec- 
ond in sheep. In exports, we lead in cattle and in 
meat and meat products. 

I ndia is the World's Second Agricultural Nation 

Leading all nations in the production of rice, 
sugar, cattle, and goats, India will be a surprise to 



24 



LESSON A 



you. She is first in exports of rice, second in pro- 
duction of cotton, flax, and tobacco, second in 
exports of cotton and hides and skins. 

Notice, however, that India's exports are not so 
important in rank as her total production. Her 
enormous population consumes much of the farm prod- 
ucts produced. 



Table III. RANK OF LEADING 


COUNTRIES IN NUMBER AND 


EXPORT .OF LIVE STOCK PRODUCTS 


Based on averages for 1909-13 or 1911-13) 


: Rank iHorses 
Countries : in : and 
: : Mules 


Cat- 
tle 


Sheep 


Swine :C-oats: 


:Kides 

and : 

: Skins 


Meats 
& Fro 

:ducts 


Butter 


Cheese 


Wool 


1. -United zNumber : 1 


2 


2 


1 : 












States :Exports: 


1 








: 1 




9 




2. India :Kuniber : 7 


1 


6 


: 1 












rExports : 








: 2 








8 


3. Argen- : Number : 4 


5 


4 


9 : 6 












tina :Exports; 








: 1 


: 2 


10 




2 


4. Austra- iNumber : 10 


9 


1 














11a :Exports: 










: 3 


3 




1 


5. Russia :Nuir,ber : 2 


3 


3 


4 : 5 












lExports: 








: 6 




2 


7 




6, Denmark :Number : 


















: Exports: 










: 5 


1 






7. Canada :Number : 9 






7 : 












: Exports: 










: 12 




1 




8. Germany :Nuraber : 8 


6 




2 : 9 












:Exports : 








: 3 






10 


9 


9. France :Nui!iber : 6 


7 




6 : 












:Exports: 








: 4 


• 10 


6 


& , 


7 


10. Nether- :Nuraber : 


















lands :Exports: 










4 


4 


2 





R ussia is the World's Third Greatest Agricultural 
Nation 

When Russia is producing normally, she is more 
to be considered as a competitor on the world's 
m.arkets than is India. 

Russia produced the largest amount of barley 
and rye in 1909-13. She was second in the production 
of wheat, oats, potatoes, and horses and mules. In 
exports, she led in wheat, oats, and barley and was 
second in exports of rye and butter. 

While Russia produced less wheat than the United 
States, she exported more because much of her popu- 
lation eats rye bread instead of wheat bread. At the 



WHAT'S BACK OF MARKETIN G? 25 

present time, (1922) Russia is out of the world's 
markets, but v/e must not forget that she is a great 
agricultural country and will probably again be a 
competitor of ours when her political situation is 
more nearly settled. 

Argentina is the World's Fourth Great Agricultural 
Nation 

Argentina excels only in the production of flax. 
However, her population consumes a comparatively 
small part of what it produces, and so Argentina is 
an important exporting country. In fact she is a 
strong competitor of the United States, leading in the 
exports of flax, corn, and hides and skins. She is 
second in exports of oats, meat and meat products, 
and wool. 

Ge rmany is the Fifth Great Produc er 

Germany's big crop is potatoes, and in this she 
leads the world. She not only produces more potatoes 
but she imports the most and exports the second 
largest amount. Germany is also a big producer of 
rye leading the world in exports. She is second 
among the nations in the production of sugar and 
swine. 

Netherlands Ranks Sixth 

The Netherlands (or Holland) does not rank high 
in production. She stands seventh in the production 
of potatoes and tenth in the production of rye. In 
other crops, her rank is lower than that, but when it 
comes to exports, she is a country to be reckoned 
with. 

She leads in the exports of potatoes and is second 
in the exports of barley and third in the exports of 
cats and rye. She is fourth in the exports of butter 
and meat and meat products, and fifth in the exports 
of rice, corn, wheat, and flax. 

She holds seventh place in the exports of 
sugar and eighth place in the exports of cotton. 



26 



LESSON A 



But how can she export so much when she is not a 
great producer? Probably the answer may be found in 
Table 4 which shows the rank in imports. You will 
see there that the Netherlands imports the third 
largest amount of barley. It seems very evident ' 
that she exports a large part of what she imports 
because she holds first place in imports of rye, sec- 
ond in the imports of oats, third place in the imports 
of wheat, corn, barley and meat, and fourth place in 
the imports of tobacco. 

Table IV. THE KATIONS THAT BUY THE MOST OF THE WORLD'S FJIRM PRODUCTS 
(Crops based on 1911-13 averages.) 
(Live stock products based on 1920 figures, except 
Germany, which is represented by 1913 figures. ) 



Countries 


: First in 


: 

: Second in 


: 

« Third in 


: Fourth in 




: imports of 


: imports of 


: imports of 


: imports of 


1. United 


: Corn-Wheat- 


: Tobacco- 






Kingdom 


: Oats-Cotton- 

: Butter- 

: Cheese-Meat 


: Potatoes- 
: Barley- 
: Sugar- 
: Wool 




: 
t 
: 






: Corn-Wheat- 




: 


2. Germany 


: Barley-Pota- 


: Rye-Cotton- 


: Oats- 


: 




: toes-Tobacco 


: Butter- 

: Hides-Skins- 


: Rice- 
: Cheese- 








Meat 


: Wool 




3. Nether- 


Rye 


Oats 


: Meat- 


: Tobacco 


lands 






• Corn- 
Wheat- 
Barley 




4. France 


Wool. 


Cheese 


Potatoes- 
Cotton- , 


Hides-Skins- 
Butt er- 








Toba'cco 


Oats 


5. Belgium 






Butter- : 


Corn-Wheat- 


] 


^ • 




Hides-Skins : 


Barley-Meat- 


s 








Wool 



How Other Nations Rank in Production and Export 

The six nations already discussed are the leading 
ones in production of surplus crops. However, other 
nations hold important places in the production of 
certain products. You will get the rank of these 
by studying Table 2, and Table 3. 



WHAT'S BACK OF MARKETING? 



27 



Illustrating Essential Marketing Services 
STANDARDIZATION 




GRADING PEACHES ACCORDING TO MARKET STANDARDS 
Any commodity that is offered to buyers in packages each contain- 
ing- a uniform product, brings better prices. Standards are first 
determined and then the product is graded to these standards. 



PACKING 




PACKING ORANGES FOR LONG JOURNEYS 

Most farm products must be put into suitable paclcages before they 
will find ready sale. Placed in suitable packages, they are also more 
valuable as collateral for making loans. 



28 



Essential Marketing Services 



ASSEMBLING 




MANY WAGONLOADS MAKE A CARLOAD 
It would not be economical to transport farm products to distant 
terminal markets in lots as small as one wagonload. The elevator 
assembles w^agonloads from many farmers. 



STORAGE 







COTTON FROM MANY PLANTATIONS 
With the cotton in store houses at concentration points, the crop 
caji be marketed almost on a moment's notice. Storage helps distribute 
surplus crops over the entire twelve months of consumption. 



Essential Marketng Services 



29 



TRANSPORTATION 




THE GREATEST SINGLE COST IN MARKETING 

Without our many railroads and steamship lines with their huge 
terminals, it would be impossible to distribute farm products. And 
marketing- has grown because products can be readily transported. 

SELLING 




AN OFT-REPEATED SERVICE IN MARKETING 
Most of the middlemen who perform marketing services actually 
own the products upon which the services are performed. Consequently, 
farm products are sold several times before they reach the consumer. 



30 



Essential Marketings Services 



RISK-TAKING 




THE SHIPPER OF THIS CARLOAD SUFFERED A LOSS 
Anyone who ships farm products, assumes the risk of loss. In the 
case illustrated in this photograph, an inspector is determining the loss 
on the potatoes due to sprouting. 

DISPERSING 




THE OPPOSITE OF ASSEMBLING 
After products are assembled into quantities large enough for ship- 
ping, they must later be broken up into quantities small enough for 
individual families. Dispersing begins on the wholesale markets. 



WHAT^S BACK OF MARKETING? 31 

These more complete tables are provided for 
reference. It is quite important that you familiar- 
ize yourself with the crops produced and exported 
by the six leading nations, but the standing of the 
other nations need not be studied so carefully 
because you will not have occasion to make use of them 
nearly so often. 

WHAT NATIONS BUY MOST OF THE SURPLUS CROPS 

Now let us consider Table IV, showing the world's 
greatest buying nations. This table, of course, 
considers only rank in imports of raw products. 
Manufactured products, except sugar, are not in- 
cluded. 

The United Kingdom, the Greatest Buyer 

The United Kingdom, including Great Britain and 
Ireland, is by far the largest buyer from the pro- 
ducing areas of the world. The United Kingdom buys 
more wheat, corn, oats, cotton, butter, cheese, and 
meat than any other country. She is second in the 
buying of barley, potatoes, sugar, tobacco, and 
wool ; sixth in the importing of rice ; and ninth in 
rye. 

Germany, the Second Largest Buyer 

Germany is the second greatest buyer, purchas- 
ing more barley, potatoes, and tobacco than any other 
nation in the world. She is second in buying cotton, 
rye, wheat, corn, butter, meat, and hides and skins; 
third in oats, rice, cheese, and wool. Germany pro- 
duces more potatoes than any other country in the 
world and still imports more potatoes than any 
other country in the world, 

H olland Stands Third As An Importer 

Third as a great buying nation, stands the small 
country of Holland, more commonly known as the 
Netherlands. More rye is shipped to the Netherlands 
than to any other country and the second largest 



32 LESSON A 

amount of oats and third largest amount of corn, 
wheat, barley, and meat. She stands fourth in the 
importing of tobacco, fifth in the importing of rice, 
and ninth in cotton. 

Fr ance is the Fourth Importer 

France is fourth as a buying nation, buying the 
most wool ; the second most cheese ; the third largest 
amounts of potatoes, cotton, and tobacco. She is 
fourth in the purchase of oats, hides, and skins and 
butter; fifth in corn and barley, sixth in the buying 
of wheat, and seventh in the buying of rye. 

Be lgium is Fifth 

Belgium is the fifth greatest buyer, standing 
third in the imports of butter and hides and skins ; 
fourth in the imports of wheat, corn, barley, meat, 
and wool ; fifth in potatoes ; sixth in rye ; seventh in 
oats and cotton, and ninth in tobacco. 

Italy is fifth in the purchase of wheat ; sixth 
in corn, oats, and cotton, eighth in tobacco. 

Eight other European countries are heavy 
importers, which makes Western Europe the world's 
greatest market place. 

How the Rank of Nations is Important to American 
Farmers 

Tvifo nations, the United Kingdom and Germany, are 
first or second, or both, in importing all the 10 
wo rld's important crops, except rice, and the five 
i mportant live stock products. Germany is third in 
imports of rice. 

Don't lose sight of this important fact as you 
proceed with the lessons in this course. Remember- 
ing that Germany and the United Kingdom are the 
world's greatest buyers of all crops and live stock 
products, you will readily understand how the changes 
in demand in those countries will affect the prices 
of farm crops here at home. 



WHAT'S BACK OF MARKETING? 55 

In the same way, you will understand that the 
production of crops in India, Russia, and the Argen- 
tine will have a marked effect on prices here, because 
those three countries are our greatest competitors 
in production and export. The y with the United 
States produce and export the most or the second most 
of all crops and live stock products excep t cheese. 

For individual crops, there are other important 

countries to be considered, but for crops as a whole, 
the two greatest buying nations. United Kingdom 
and Germany, and the three great producers, India, 
Russia, and Argentina, influence our markets the 
most. 

PART II. 

WHAT HAPPENS TO CROPS ON THE WAY TO MARK ET 

To study the marketing problem in detail, it is 
necessary to resolve it into its component parts or 
activities. In so doing, v/e discover that the dis- 
tance between producer and consumer has become 
greater and greater. Marketing has developed away 
from the old order of direct sale. It has been found 
desirable to introduce a greater number of interme- 
diaries who participate in various ways in moving, 
storing, and transforming the goods in order that 
they may be where they are wanted, when they are 
v/anted, and in the form they are wanted. 

Not all of the work which will be discussed on 
the following pages is performed in the marketing of 
every product, but as a whole, this list represents 
the typical work necessary to prepare farm products 
so that they will be in the form you wish to buy them 
for your household needs. 

Marketing Services Considered in This L e sson 

Strictly speaking, perhaps, marketing services 
should include only those performed on raw agricul- 
tural products. But it is believed that every stu- 
dent of marketing should know about the processing 



34 LESSON A 

and manufacturing of agricultural products. These 
students should know too, how these manufactured 
products are handled between the processors or manu- 
facturers, and the ultimate consumer. 

Consequently, both processing and manufactur- 
ing and dispersing will be discussed in this course. 

The principal kinds of work performed in connec- 
tion with marketing are classified in this lesson as 
follows: 



1. 


Standardization 


6. 


Financing 




or grading 


7. 


Risk-Taking 


2. 


Packing 


8. 


Processing and 


3. 


Assembling 




manufacturing 


4. 


Storage 


9. 


Selling 


5. 


Transportation 


10. 


Dispersing or 
dividing 


I. Standardization Usually 


Comes 


First 



Successful marketing today depends more than 
formerly on the way in which commodities are sorted 
for market. So generally is this now recognized 
that grading influences price more than most any 
ether one factor. 

Standardization or grading consists of sorting 
commodities into groups of uniform kind, size, and 
quality. Such grading, to be of greatest value, is 
accomplished through the use of recognized stand- 
ards. 

The primary purposes of grading to standards are 
to eliminate the necessity for inspection on pur- 
chase ; to avoid paying of freight, storage, and 
other marketing costs on goods that may later be 
sorted out and discarded; and to facilitate financ- 
ing. 

Where Grading Is Done — Grading may be done: 

1. At the farm 

2. By producers' associations 



WHAT'S BACK OF MARKETING? 35 

3. At centralized country points, as at apple 
packing houses 

4. By dealers who wish to place popular and 
profitable goods in the trade either wholesale or 
retail 

5. By those who wish to ship nationally-stand- 
ardized commodities in interstate commerce 

No Other Service Increases the Price L ik e 
S tandardization — Market specialists claim that, 
compared with the cost of performance, none of the 
steps in marketing enhances the value of commodities 
as greatly as this one of grading. Expansion of the 
market through sale by sample, sale by type, and 
sale by auction, is based on the use of grades. Stor- 
age, financing, and the whole system of warehouse 
receipts — all these are based on the use of generally 
recognized grades. 

This subject of standardization is thoroughly 
treated in later lessons where you will find more 
specific information regarding the grading of the 
particular commodity in which you are most inter- 
ested. 

2. How Proper Packing Facilitates Marketin g 

Most farm products require packing in one form 
or another in the process of marketing. This service 
is sometimes performed at the farm and sometimes 
later on. In fact, some crops must be repacked or 
repackaged several times, to meet the requirements 
of the trade and the demands of the consumer. 

These demands are sometimes little more than 
whims, but it pays to meet even such demands. For 
example, apples in bushel boxes will bring more on 
some markets, while on other markets apples will 
hardly sell at all in boxes, but are preferred in 
bushel baskets or in barrels. 

In some sections, hay is wanted in bales of an 
entirely different size than is commonly used in 
other sections. 



36 LESSON A 

Raisins used to be sold almost entirely in bulk. 
Now housewives will hardly buy bulk raisins. In fact, 
there is now a demand for both raisins and prunes in 
packages small enough to slip into a vest pocket. 

Effective Packing Reduces Marketing Costs — 

The primary purposes of packing are: 

1. To facilitate handling 

2. To reduce freight charges 

3. To reduce storage costs 

4. To reduce other marketing costs 

5. To prevent shrinkage and deterioration 

6. To make products more attractive 

The baling of cotton, for instance, accomplishes 
practically all of these purposes. 

It facilitates handling by putting the cotton 
into firm, compact form, with covering securely 
wired to withstand handling by hooks. 

It reduces charges for freight because of the 
very condensed form of the product in the bale, 
allowing many bales to be carried in one car. 

It reduces storage charges because the bales 
are more easily handled than bulk cotton and they 
take up less space. 

It facilitates financing, because the commod- 
ity is in a recognized, standardized, more or less 
protected unit. 

It retards deterioration because the increased 
density and the covering lessen its exposure to 
moisture and "country damage," 

Products in Packages Are Best for Collateral - 

Loans are not readily obtainable on advantageous 
terms, if at all, on products in their original 
state, whether cotton in the field or apples on the 
tree. Properly harvested, and reduced to accept- 
able marketing units, such as bales, boxes, and 
carloads, they become valuable collateral because 



WHAT'S BACK OF MARKETING? 37 

they can then be more quickly turned into cash in case 
of necessity. And bankers want collateral that can 
be sold promptly and without additional expense. 

Consumers Will Pay More for Neat Packages - 

Facking and packaging is a distinct service to farm- 
ers, to dealers, and to consumers. So decidedly do 
consumers realize this, perhaps unconsciously, that 
they willingly pay higher prices for the sake of 
securing their products in a form convenient and 
attractive for their use. Few housekeepers are 
willing to buy tub butter for table use. Few pur- 
chasers are willing to carry eggs loose in a paper 
sack; they prefer to pay more to have them in an 
attractive box. 

3 . Assembling in Larger Lots Meets Market Demands 

The bringing together of enough of one product 
to make a carload for shipment to a central market 
constitutes "assembling." It is in the saving on 
freight rates that assembling shows its greatest 
value. However, most goods could not be sold at all 
on central markets if they were not offered in 
carloads. The big buyers would not bother with a 
lot of small purchases. 

The work of assembling may take place at the 
farm or at the local or terminal market. The farmer 
may assemble and ship his apples by the carload. If 
he sells by the box or number of boxes, at some later 
stage, these boxes are usually grouped with similar 
boxes by an intermediate buyer or dealer to form a 
carload for shipment. 

Although carload lots seem large to the farmer, 
they are units too small to fill many demands. The 
boat lying at dock demands many carloads of grain 
before its cargo is complete. The packing house 
requires many carloads of cattle a day. 

This larger form of assembling to complete large 
transactions in agricultural products is a service 



38 LESSON A 

essentially for a commercial market man, except in 
cases of unusually large, well-organized, and 
strongly-financed producers or associations. 

4. We'd Starve in Winter If It Were Not For Stor- 



Production is essentially seasonal, but consump- 
tion is relatively uniform during the entire year. 
Obviously, therefore, some adjustment is necessary 
between the harvesting of the crops and the feeding 
of the people. To meet the continuous and more or 
less uniform demand by the consumers, storage has 
been provided. 

Products may be stored: 

1. On the farm 

2. At shipping point 

3. Along the route to market 

4. In the large market centers 

If you store your crop, you naturally expect to 
receive for it when it is sold later, the price at 
harvest, plus at least the cost of storing. Simi- 
larly, if you sell at time of harvest, leaving to 
others the task of storing a large part of your out- 
put, and supplying it to consumers when they want 
it, you must expect to accept a lower price than is 
common 10 months after harvest. 

If you have facilities for storage, or are 
willing to take the risk of storage, you are likely 
to receive a higher price later on than at the time 
of harvest. However, most farmers do not care to 
take the risk of loss and lower prices that is neces- 
sary when crops are held. Consequently, others buy 
the surplus at harvest time and store it as a specu- 
lation, usually making a profit to pay for the risk- 
taking, but sometimes suffering a loss. 

How Storage Serves Both Producers and Consum- 
e rs - Storing is a service both to the producer and 
to the consumer. It widens the market for the 



WHAT^S BACK OF MARKETING? 39 

farmer, and stabilizes the supply for the consumer. 
It tends to stabilize prices to the advantage of both. 
It prevents excessive deterioration and spoilage 
and thus reduces loss for both. One of its greatest 
benefits to farmers is derived through accredited 
v/arehouse receipts which furnish safe collateral on 
which money may be borrowed. 

This subject is treated more specifically in all 
its details, in later special lessons. 

5. Why Transportation Adds So Much to the Cost of 
Marketing 

All farm products that enter marketing channels 
are transported. If the consumer is at a local mark- 
et, the matter of hauling may be purely a local one 
and may be performed by the farmer himself, who thus 
takes time from the production work of his farm and 
is entitled to receive some compensation for this 
time. 

Local Hauling Is Expensive 

Farmers are gradually coming to realize that 
local hauling, such as usually falls to them, is 
expensive. Good roads and good equipment decrease 
the apparent expense of this service, but, although 
both are becoming more prevalent year by year, 
their initial expense is heavy and maintenance may 
be costly, so that there appears to be no cheap way 
out of the difficulty. 

Such studies as have been made have shown this 
cost of hauling to average 5% of the farm value of 
the crops marketed. The actual costs vary greatly, 
ranging from 2% to 9%. 

Transportation creates the greatest single 
cost in marketing. Consequently, it needs to be 
treated thoroughly. You will want to know all about 
transportation by rail and by boat ; about transpor- 
tation in America and to foreign countries. You 



40 ' LESSON A 

will, therefore, be intensely interested in the 
special transportation lessons that follow later on 
in the course. 

6. How Marketing is Financed 

Financing often begins before the crop is har- 
vested — when the farmer borrows from his local 
bank to defray production and harvesting expenses — 
and continues until the crop has been distributed and 
is in the hands of the consumer. The interest on 
borrowed money along the way is a necessary part of 
the cost of marketing and is added to the other 
expenses that accumulate. 

The grain buyer at the country station, whether 
agent for some company or ov/ner of his own elevator, 
pays cash for the farmer's grain. If he is an agent, 
he is supplied with money by a terminal market com- 
pany that he represents. The company borrows from 
banks and pays interest on the money that is advanced 
to the farmers for their grain. 

Commission Houses Advance Money to Local Buy- 
e rs - The country buyer, if an independent or a 
cooperative elevator owner, may be financed in part 
or almost wholly by some commission house at a term- 
inal market. Usually, some money will be supplied 
by the local bank at the country station. 

Buyers May Get Immediate Cash From Shipments - 

The independent buyer at the country station will 
probably sell his wheat "for shipment" within a spe- 
cified time. As soon as he has a carload, he ships it 
to some commission house, drawing a draft , with bill of 
lading attached, against the house for about 75% of 
the value of the wheat. 

The local bank may, on the basis of this draft, 
credit the buyer's account with the amount, charging 
interest until the draft is credited to its own ac- 
count by its correspondent bank at the terminal 



WHAT^S BACK OF MARKETING? 41 

market. The commission house pays the draft and 
charges the country shipper interest on the amount 
it has thus advanced him until the car of wheat has 
been received and sold. 

Why Interest Charges Multiply - When a car of 

wheat arrives at the terminal market, it is sold to 
some mill, terminal elevator company, or shipper. 
If to a shipper, the grain, either in the same car or 
after having been transferred to another, is sent on 
to some mill or exporter, and the shipper draws a 
draft with bill of lading attached, on the concern 
that buys it. The bank credits the shipper's account 
and charges interest until the draft is paid. 

Finally, the miller who grinds the wheat, or the 
exporter who ships it out of the country, draws a 
draft, with bill of lading attached, upon the concern 
to whom he sells, and interest is again charged. It 
is not carrying the illustration too far to say that 
the flour jobber or the baker who receives the flour 
from the mill often borrows money to enable him to 
pay the draft which was made against him by the mill. 

I nterest Piles Up When Wheat Is In Storage - If 

the car of wheat shipped from the country station is 
stored in a terminal elevator, it is put with millions 
of bushels of other wheat into storage bins to be held 
until wanted by mills. This involves not only a 
storage charge, but an interest charge as well. 

Owners of grain stored in terminal elevators are 
heavy borrowers. They borrow with warehouse receipts 
as collateral. "Grain paper," as their notes are 
called, is regarded by bankers as of the highest 
class. Grain paper from western terminal markets 
is sold to banks throughout the Central states and 
in the Eastern money centers. 

7. Risk-Taking - How It Is Handled 

In most systems of marketing, someone must take 
chances on loss that comes from changing market con- 



42 LESSON A 

ditions, deterioration, fire, and other damage. 

Insurance and hedging are among the aids utilized 
to forestall loss from risk-taking which is closely- 
linked with several of the other steps in marketing, 
notably with storage. Even the consumer occasion- 
ally carries some of the risk when he stocks up far 
in advance of his need of household supplies. The 
products he buys may deteriorate or decline in price. 

"Carrying the Risk" Is a Necessary Evil - We 

have seen that most agricultural commodities must be 
carried long distances, and that most of the staples 
must be held for a comparatively long time. Obvi- 
ously, therefore, carrying the burden and risk of 
unconsumed foods is a "necessary evil" in marketing. 
V/hether assumed by farmer, intermediaries, or the 
final purchaser himself, the one who carries this 
burden of risk is entitled to some compensation for 
the hazardous part he is playing. 

8 . Processing and Manufacturing Have Become 
Important Farts of Marketing 

The farmer sells wheat, live stock, hides, and 
cotton. The consumer buys flour, meat, shoes, and 
clothing. Somev;here between seller and buyer, it is 
evident that wheat must be milled; cattle, sheep, 
and hogs must be reduced to steaks and chops ; hides 
must be tanned, and transformed into shoes; cotton 
must be spun and woven and made into garments ready to 
wear. 

In the early days, farmers killed, cut up, and 
sold as meat, the cattle, hogs, and sheep they raised. 
Only in comparatively rare instances do such prac- 
tices now exist. Farmers, except in cooperative 
groups employing others to do it for them, have 
practically withdrawn from this manufacturing field 
as a marketing activity, leaving it to those who do it 
as a sole business. 



WHAT'S BACK OF MARKETING? 43 



Manufact uring Improves the Product - Manufac- 
turing, however, does more than merely serve the 
farmer and the purchaser by relieving them of certain 
work. Generally speaking, by doing this work on a 
large scale, many improvements can be made. 

Large-scale manufacturing, with large output, 
obviously makes possible a reduced cost. From the 
larger amounts of raw material available to a large 
establishment, grades are more readily established 
and maintained. And because of superior equipment 
and highly specialized workers, great improvement 
in quality and appearance is possible. 

For instance, in many cases, creameries can man- 
ufacture butter of finer quality than farm butter 
carefully produced in the same locality. Certainly 
home v/eaves for clothing, however durable, will no 
longer satisfy the men and women of today. 

Large-scale operations make possible greatly 
increased consumption. Then, too, there are many 
profitable by-products from a large packing house 
but there is little unprofitable waste. 

9. Selling , a Much Repeated Process 

The act of selling may occur but once during the 
marketing process, or it may occur many times. The 
farmer may sell direct to the consumer at the farm, 
on a public market, or he may drive from door to door. 
He may sell to a local buyer or car-lot assembler; to 
a local marketing concern such as a grain elevator 
or creamery; or he may ship to a commission firm in 
a large market. 

The local buyer or car-lot assembler may sell to a 
packing house or other intermediary, or through a 
commission man. 

The commission man or packing house in turn, may 
sell through jobbers, or direct to retailers. 

The retailers sell to the ultimate consumers, the 
family buyers. 



44 LESSON A 

Many other methods of sale exist to fit other 
conditions or demands. Jobbers, brokers, traveling 
salesmen, agents, auctioneers, advertisers - all 
these contribute services in the various methods of 
sale. 

W hy Expert Knowledge Is Needed in Selling - To 
sell advantageously in the large markets, one must 
have a thorough knowledge of the markets. 

In some methods of selling, goods may be sold on 
their merits alone, and if the demand is great enough, 
little of the trading instinct is necessary in the 
transaction. 

In other methods, a knowledge of human nature and 
skill in using this knowledge are the essentials. 
The auctioneer needs a facility and a detailed 
knowledge of human nature unused by commission men, 
but he may not need the commission man's wide 
knowledge of markets and market practices. 

By the use of skill, one salesman may effect more 
sales of an inferior product than the more conserva- 
tive salesman makes of a superior product, even 
though the price be the same. 

Insofar as salesmanship and advertising expand 
sales solely for the benefit of the producer, they 
should not be called productive. But if they are of 
an educative nature, if they tend to improve 
standards of living, by introducing and extending 
the use of desirable products, they are socially 
beneficial. 

10. Dispersing, the Opposite of Assembling 

Throughout the assembling stages of marketing, 
quantities handled by successive agencies increase 
in size. The farmer sells, usually, in relatively 
small quantities. The local buyer or dealer collects 
and ships in carload lots. The packing house or mill 
uses many carloads in one day. The warehouse col- 
lects and holds under one roof, quantities of which 
the country buyers' carlot is only a small unit. 



WHAT'S BACK OF MARKETING? 45 

Now we reach that stage of marketing where these 
large quantities must be broken up into smaller lots 
in order to fill the requirements of dealers who 
supply our average American families. 

These families can house and use but small 
quantities at a time and buy, in the main, not the raw 
products of the farm, but these products in their 
later, processed or manufactured form. In this 
analysis, that part of the marketing process which 
has to do with the actual supplying of the consumers' 
wants, when and as demanded, is called "dispersing." 

So large is the bulk economical for transporting, 
storing, processing, and financing, that even the 
wholesale dealer cannot, as a rule, undertake profit- 
ably to effect the full amount of breaking up re- 
quired to supply the retail grocer with the small 
quantities of the large number of products which he 
must carry. 

Both Wholesalers and Jobbers Are Needed - Fam- 
ily purchasers cannot and will not go long distances 
to buy at concentration points. They must have some 
point in the neighborhood where they can buy small 
quantities frequently and at convenient times. This 
means that retail stores must often be located in 
business or residence neighborhoods where rents are 
high and space at a premium. They cannot store stock 
for many days in advance nor buy the amounts offered 
by the wholesaler. 

Between the two, therefore, the broker and the 
jobber have intervened to supply, with more flexi- 
bility, the needs of the retailer. 

EACH SERVICE HAS SUBDIVISIONS 

Now that you understand the importance of each of 
these services, you must realize that not all of each 
service is necessarily performed at any one place at 
any one time. 



46 ^ LESSON A 



Wheat may be cleaned and graded (standardized) 
at the local elevator. It may then be mixed or 
blended at a terminal elevator, and this also comes 
under the head of standardization. 

Cotton is assembled into carloads at a Georgia 
village, but it is again assembled (this time into 
shiploads) at a seaport. 

Many products are manufactured more than once. 
Take lard, for example. First the lard is manufac- 
tured in the packing plant. Then the lard is used in 
making pastry which is what the ultimate consumer 
buys. 

Each of these marketing services will be dealt 
with exhaustively in separate lessons later in the 
course, but it is important that you have the general 
understanding of their relation to each other which 
this lesson has given you. 

HOW EDUCATION WILL IMPROVE MARKETING CONDITION S 

The grave danger of much of the criticism of the 
present day is that it is built on insuffcient 
knowledge, hearsay, and prejudice. Research (such 
as was necessary in the preparation of these les- 
sons) and education built upon it, form the only safe 
basis for improvement in marketing methods and for 
determination of fair rates of charge. The farmer, 
the middleman, and the consumer can contribute to the 
solution of our marketing difficulties by informing 
themselves of the process, the reasons for it, and 
the methods by which it is now accomplished. If 
based on such unbiased knowledge, their suggestions 
will be practical and helpful. 

Legislation, to be constructive and effective, 
must be built upon a clear understanding of underly- 
ing principles, and its administration must be based 
on a thorough knowledge of the forces and agencies in 
operation. 

Without education in its various forms such as 
demonstrations, extension work of all kinds, and 



WHAT'S BACK OF MARKETING? 47 

widespread teaching of marketing facts by corre- 
spondence and in resident schools, no important part 
of the people can ever gain that knowledge and under- 
standing of the economic principles of marketing 
which are essential to improvement. 

In the light of knowledge and understanding, will 
come the efficiency and fair play in marketing which 
are essential to the future well-being of the 
American people. 



48 LESSON A 



NOW - THE MIDDLEMEN LESSON 

You have learned of the 10 services that are 
performed upon agricultural products between the 
time they leave the farm and the time they arrive at 
the home of the ultimate consumer. You will want to 
know v/ho performs those services. And the next 
lesson by Prof. Paul D. Converse will give you all of 
the details. 

The men who perform these marketing services are 
commonly called "middlemen," And that word has had 
more bad things said about it than most any other. 
It isn't so often that the men themselves who perform 
these services are blamed. It's usually a denuncia- 
tion of middlemen in general. 

Is this justified? 

Are there some middlemen who charge too much for 
their services? 

Are there some we could get along without? 

Can we save half of the expense of marketing? 

Can we market our farm products without paying 
the bankers large amounts of interest before the 
products finally reach the consumers? 

Can we prevent speculators from taking a big 
share of the price the consumer pays? 

Those are pertinent questions and you will be 
able to answer them after you have mastered Lesson B. 
You will find it one of the most interesting lessons in 
the course. 

You will find in it a mine of material on which to 
base arguments and discussions with the people in 
your community. It will prepare you to take a 
definite stand on many of the disputes in connection 
with marketing, and you will have facts to back your 
stand. 



WHAT^S BACK OF MARKETING? 49 

GLOSSARY OF MARKETING TERMS USED IN LESSON A 

Inasmuch as a glossary is provided with each 
lesson, no attempt is made either to give in each 
glossary complete definitions, or to give all the 
possible meanings of each term when used in different 
connections. 

The definitions here given explain the mean- 
ings of the terms as applied to marketing farm 
products, and more specifically to the meaning as 
used in this lesson. 

It is difficult to find in standard dictionaries 
satisfactory definitions of many marketing terms as 
used in a commercial sense. In fact, it would be 
difficult to find a definition for some of these 
marketing phrases in any other place except in this 
glossary, 

assembling, n. Act of bringing together to make 
larger quantities. As used in marketing, this refers 
to the bringing together of smaller quantities of 
farm products to make up carloads, shiploads, or 
other commercial units. 

a uctioneer, n. One who conducts and sells by auc- 
tion. One who sells products to the higest bidder. 
broker, n. A person who negotiates sales or con- 
tracts as an agent, charging a small commission 
or fee for his service. 

carlot assembler, n. One who assembles farm 
products into carlots for shipment ; practically the 
s£ime as a local buyer. In the act of assembling, he 
usually purchases the crops. 

collateral, n. Property given as security for debt. 
commercial market man, n. A man engaged in the 
business of serving as agent in the selling of 
products on central markets, or engaged in the 
buying of products from producers and re-selling 
of those products. 

commiss i on house, n. A business concern that 
receives goods on consignment to be sold for the 
producer or shipper. The commission house receives 
payment for its services in the form of a percentage 
of the sales or in the form of a fixed fee. 
consign, v. t. To forward or deliver to another 
to be sold. The shipper retains ownership in 
articles consigned until the commission man or 
broker to whom consignment is made has effected a 



50 LESSON A 

sale. When goods are shipped thus to be sold, it is 
said they are shipped on consignment. 
consiimer, n. One who uses up an article of ex- 
changeable value, or v;ho produces from it another 
article of value. For. example, a manufacturer may 
be a consumer of raw products. More correctly, the 
term "ultimate consumer" describes the person usually 
referred to as consumer. Ultimate consumers are 
those who use up articles of exchangeable value, 
so that those articles v;ill not again enter the 
channels of trade. We are all ultimate consumers. 
cooperative, n. In these lessons the word 
"cooperative" is used to refer to a producer's 
cooperative association, v;hich is an organization 
made up of a number of producers for the purpose of 
buying and selling to their mutual advantage. 
correspondent bank , n. A bank in a larger city in 
which a country bank maintains an account, the same 
as a local depositor maintains an account in a coun- 
try bank. This same word is used to designate the 
country bank. The city bank calls the country bank 
its correspondent, just as the country bank «alls the 
city bank its correspondent. 

country buyer, n. One who buys direct from farmers 
in their local towns. Sometimes a representative of 
a larger concern with headquarters in a permanent 
market ; at other times, a local man operating inde- 
pendently and selling either to terminal market 
concerns or other commission men or brokers. 
deficit area, n. A section in which some necessary 
food or clothing materials are not produced in quan- 
tity large enough to supply the population. Deficit 
areas must buy those products from surplus areas. 
deterioration, n. The process of being lessened in 
worth. In this lesson it is used to refer to the change 
in condition or quality of food or clothing materials, 
which makes these materials of less value for their 
intended use. 

d ispersing, n. The distribution of food or clothing 
to the ultimate consumers. The process of dispersing 
includes the distributive work of manufacturers, 
wholesalers, shippers, and retailers. 
distribution, n. The transfer of commodities from 
producers to consumers. 

distributor, n. One who engages in some part of the 
work of dispersing necessary commodities to ultimate 



WHAT^S BACK OF MARKETING? 51 

consumers. A distributor may be a manufacturer, a 
manufacturer's representative, a wholesaler, a job- 
ber, or a retailer. 

draft , n. An order dravm by one party or person on 
another for the payment of money to a third ; mostly 
limited to an order payable at or collectalDle through 
a bank or other financial agency. 

exporter, n. One who buys products in the section in 
which they are produced and ships them to some foreign 
section for sale. 

exports, n. That which is sold and transferred away 
from that section in which it is grown. It may be 
used to refer to products produced in one state and 
sold in another, but it is better applied only to 
those products that are sold outside of the nation in 
which they are produced. The v/ord as used in this 
lesson refers to products sold outside of the nation 
in which they are produced. 

final purchaser, n. One who buys to consume in a 
way that will prevent the product from again being 
placed upon the m.arket ; same as ultimate consumer. 
financ ing, n. The process of securing or supplying 
the money necessary to purchase goods for re-sale, the 
money to be repaid the borrower when the goods are 
sold. 

function, n. Any specific power or act of operating 
that belongs to an agent or the specific work accom- 
plished by that agent. Example: the functions of the 
broker. 

grade, n. A classification of a product. In market- 
ing, the classification is made to separate articles 
with different degrees of acceptability to the buyers. 
The grade may be based on size, color, physical condi- 
tion, flavor, texture, firmness, and so on. 

grading, n. The act of separating articles into 

classes, differing in their degree of acceptability to 

purchasers. 

grain paper , n. Notes secured by warehouse receipts 

representing grain in storage. 

imports, n. Articles brought into one section from 
another. In these lessons the word "imports" is used 
more strictly to refer to articles brought from one 
nation to another. Imports are not necessarily pro- 
duced in the nation from which they are brought. 
Sometimes they are imported into one nation and then 
exported to another. For example, the Netherlands 



52 LESSON A 

imports much more than she consumes of several dif- 
ferent products, but she acts as a shipper for some 
interior countries and re-sells the articles to 
buyers in those countries. 

i nspection, n. An official examination by persons 
appointed for the purpose ; an examination by a pros- 
pective buyer. 

intermediate buyer, n. One who purchases an article 
between the time it leaves the producer and before it 
reaches the consumer. The purchase may be made for 
speculation or for changing the form or location of 
the article to make it more acceptable to the ultimate 
consumer. 

intermediary, n. One who performs some act or mar- 
keting service anywhere between the producer and the 
consumer. This service may be only the buying and 
selling of the article, or it may be changing of the 
form or location of the article to make it more 
acceptable to buyers. 

interstate commerce, n. Commerce that includes the 
shipment from one state to another. This is usually 
considered to be the only commission on which the 
United States has jurisdiction, and loss governing any 
phase of the marketing of a production within the state 
where it is produced must be state loss. 

jobber, n. A man or concern that sells to retailers a 
variety of goods in quantities usually smaller than 
will be supplied by wholesalers. 

local buyer, n. The same as country buyer. 
manufacturing, n. The act of changing the condition 
of a product to make it useful in meeting certain needs 
of ultimate consumers. In the process of manufactur- 
ing, the article or parts of it may be combined with 
other material. 
market , n. The place where products are sold. 

foreign market, n. A terminal market in a 

foreign country. 

intermediate market, n. A place where carloads 

are assembled into train loads or boat loads for 

shipment to terminal markets. 

local market, n. A market near to the producer, 

where most producers sell to local buyers. 

retail market, n. A place where articles are 

sold to the ultimate consumer. 

seaboard market , n. A market located in a city 

which is an ocean port. Most of the selling done 



WHAT'S BACK OF MARKETING? 53 

here is to exporters and is for shipment by boat. 
terminal market, n. A place where a large per- 
centage of any crop is sold to manufacturers, 
exporters, or speculators; sometimes known as 
concentration point. For instance, Chicago, 
Buffalo, and Minneapolis are terminal grain 
markets. 

wholesale market, n. A place where products are 
sold to wholesale buyers, or where products are 
sold by wholesale buyers to retailers ; for ex- 
ample, the South Water Street Fruit and Vegetable 
Market in Chicago 

world market, n, A market where products are sold 
to be re-shipped to various nations of the world. 

marketing machinery, n. The agencies (considered 
collectively) that perform the work of selling, 
changing the form of, and changing the location of 
products to enable them to be sold advantageously to 
ultimate consumers. 

marketing process, n. This includes the work of 
selling, changing the form and changing the location 
of products to enable them to be sold advantageously 
to ultimate consumers. 

merchandising, n. The process of selling articles 
to ultimate consumers, including the increasing of the 
demand for these articles. 

packaging, n. The act of placing articles in packages 
to make them more conveniently handled and more 
acceptable for transportation and selling. 
packing, n. The act of putting articles into more 
favorable condition for storage, or shipment, or 
selling. 

p rocessing, n. The changing of the form of an article 
to enable it to meet certain needs of consumers. 
Strictly speaking, processing usually does not sub- 
tract anything from the article excepting moisture, 
and usually does not combine any other product with 
the article. In this way it differs from manufactur- 
ing. However, sometimes manufacturing is included in 
the term "processing." 

p roducers, n. Strictly speaking, only those who 
produce raw materials. Sometimes used, however, to 
refer to those who produce and manufacture or process 
articles. 

public market, n. A place where producers display 
articles to be sold direct to ultimate consumers. 



54 LESSON A 

The market is usually maintained by a municipality. 

repackage, n. The transferring of articles from 
one package to another. This is done usually because 
the original package is not as acceptable to the 
prospective buyer as the new one. Sometimes it is 
done to get the articles into smaller packages as 
smaller packages are more in demand. 

research, n. Intelligent, protracted investiga- 
tion, especially for the purpose of adding to human 
knowledge ; studious inquiry. 

retailer, n. One who sells direct to ultimate con- 
sumers in comparatively small quantities. 

risk-taking, n. The act of assuming the responsi- 
bility for loss ; used in marketing to refer to the 
responsibility that comes from the ownership of 
articles held in storage. 

sale by auction, n. A sale in which the buyer makes 
his own price, by competing with others in his offers 
to the auctioneer. The article is finally sold to the 
buyer making the highest offer. 

sale by sample, n. A sale made under the condition 
that the buyer has a sample of the product offered for 
sale, to be personally examined. 

sale by type, n. A sale made under the condition that 
the buyer does not see a sample of the article pro- 
duced, but that the buyer is sure the articles deliv- 
ered will be according to a specified type, grade, or 
standard. 

shipper, n. The owner of articles at the time they 
are shipped. 

shrinkage , n. Degrees in size or weight of products 
usually due to evaporation of moisture. Sometimes 
the loss is by leakage or evaporation by unfavorable 
weather conditions. 

speculator, n. One who buys articles whose form he 
does not intend to change, but who intends to re-sell 
the articles at an expected advance in price. 
Speculators often do change the location of articles 
and sometimes store these articles to be sold at an- 
other time. 

stabilized prices, n. Prices made uniform or nearly 
uniform throughout an extended period. 

standard, n. In marketing, standard is used to refer 
to the qualifications by which an article is judged 
as to its value to ultimate consumers. Standards are 



WHAT'S BACK OF MARKETING? 55 



set up by federal law, by state law, by organizations, 
and by individuals. 

St andardizat i on , n. The act of dividing articles 
into grades, the article to be grouped and selected 
according to specified conditions. 

storage, n. The act of putting away articles for 
future consumption. 

surplus area, n, A section in which one or more 
products is produced in greater quantities than are 
needed by the local population. 

terminal market com pany, n. A concern with head- 
quarters in a terminal market and organized for the 
purpose of buying usually on local markets and selling 
on the terminal market. 

t rade customs, n. Methods of procedure that have 
been followed by marketing agencies for some time. 
trade routes, n. Routes of travel over which certain 
products are customarily sent from one market to 
another. 

transportation, n. That part of marketing which 
consists of changing the location of articles with 
the ultimate purpose of having these articles in a 
location convenient to the ultimate consumers at a 
time when the ultimate consumers will be ready to buy 
them. 

ultimate consumer, n. One who consumes articles in a 
way that prevents them from being used again or 
entering again into trade. We are all ultimate con- 
sumers. This term is used to make a distinction 
between those who consume directly and those who con- 
sume in the process of manufacturing other articles. 
A manufacturer may be a consumer, but as a manufac- 
turer he may not be an ultimate consumer. As an 
individual he is an ultimate consumer of food. 
unit, n. A single thing or group recorded sepa- 
rately. 

warehouse receipt, n, A document supplied to the 
owner of a commodity by the owner of a licensed ware- 
house. This receipt indicates the quantity and grade 
of the product. 

warehousing, n. The operation of a warehouse for 
storing products. Often a fine distinction is made 
between this and storage, the difference being that a 
so-called warehouse man often attends to the details 
of deliveries of smaller quantities of the articles 
stored. 



56 LESSON A 

wholesaler, n. A man or concern that supplies goods 
of restricted variety in quantities larger than 
retailers usually care to buy. Ordinarily, the 
wholesalers sell to jobbers and jobbers sell to 
retailers. 



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